UK retail figures surprise to the upside as US employment numbers spook investors

GBP

Yesterday we saw UK retail sales come in at a 0.6% gain for September; a positive sign compared to August’s contraction and with an upside surprise to analysts’ forecast of 0.4%.

This obviously shines some positive light on the UK economy and the market reacted positively following the release. However, at the end of the day, sterling failed to gain against most of it’s counter parts, this was mainly due to risk averse behaviour in the market. This became very evident, especially during the American session where GBP/USD fell off.

EUR

At the moment investors seem to be focused on headlines out of Europe with regards to another Greek bailout and the first of potentially several Spanish bailouts. A Spanish bailout request this week would be a major step forward for leaders and could mark a decisive shift in the crisis, especially for the markets if decisive action on the bailout is taken during the conclusion of the EU Summit today.

European Union leaders agreed on a legal roadmap to establish a single bank supervisor for the union. The first day of talks in the EU summit in Brussels saw leaders closing in positions on a deal aimed at completing the legal framework by the end of the year, with implementation in the course of 2013.

Big bond auctions in Italy and Spain gave a surprising boost to the biggest countries reeling under Europe’s debt crisis, as Italy sold a record €18 billion worth of bonds, enough to satisfy its borrowing needs for the rest of the year.

Spain also met demand for some €4.6 billion in bonds; a sale that was pretty much made possible by a decision earlier in the week by Moody’s ratings agency not to downgrade Spain further.

This morning we saw German Producer Price index coming in much in line with market expectation, it rose 0.3% MoM during September and 1.7% over the last twelve months. Forecasts were expecting +0.3% and +1.6%, respectively.

USD

The Greenback had a strong trading day yesterday supported by risk averse behaviour in combination with some positive U.S data.

The Philadelphia Fed Index, which is a monthly report on the growth in the manufacturing industry, came in with a upside surprise, showcasing a positive figure of 5.7 in comparison to last months negative 1.9 – way over the consensus expectation of positive 1. On the other hand, a more careful analysis of these figures suggests that the increase is most likely to be boosted by higher prises rather than actual growth.

Jobless claims came in slightly worse than expected at 388K, and this has spurred some speculation that a recovering labour market in the U.S as indicated recently by the NFP report might not be as strong as initially hoped for.